Overcapacity of chip production is still optimistic about the future development of the industry

There will be excess capacity in 2011, but we are still optimistic about the future development of the industry.


Analysis logic: We do not consider the industry supply and demand situation before 2009. For 2010 and beyond, we compare new demand and new supply.


Analysis of new supply: We believe that the effective capacity increase ≠ MOCVD delivery quantity. We expect to add 500 units and 700 MOCVDs worldwide in 2010 and 2011, and deliver them in batches. It takes a certain period of time for the delivery of the equipment to arrive at the production. In addition, the contribution rate of the production equipment for each quarter is different for the annual production capacity. Therefore, the effective capacity increase ≠ MOCVD delivery quantity. According to our calculations, the number of equivalent new MOCVDs in 2010 and 2011 was 291 and 555 respectively. New demand decomposition: We expect about 334 sets and 426 new orders for 42 MOCVD in 2010 and 2011, including 203 and 183 LED LCD TVs respectively, and 16 and 6 laptop computers respectively. 21 sets and 21 sets are required respectively. The general lighting needs 79 sets and 197 sets respectively, and the display screen needs 11 sets and 14 sets respectively.


Supply was tight in 2010, and oversupply in 2011: Overcapacity in 2011 is a high probability event, but it does not change our view of the LED industry. Overcapacity can cause a sharp drop in chip prices, which will help accelerate the launch of the general lighting market. Once the lighting market breaks out, the LED industry will usher in a second wave of growth. Unlike the first wave, the second wave of growth continues to have longer events and will have a far-reaching impact on the industry.


Investment logic: We believe that in the context of oversupply of LED chips, the price of LED chips will drop sharply, and the integration within the industry will accelerate. We are more optimistic about the downstream of the industry chain, it is recommended to choose companies with rapid growth in downstream applications, stable expectations, and good customer reputation. We are very optimistic about the future general lighting market. LED lights as the third generation of light source, the prospects are very bright, will drive the second wave of growth in the LED industry, please pay attention to our follow-up industry in-depth report. In addition, we are also optimistic about upstream and downstream integrated companies, their risk resistance is stronger, such as Cree, Nichia, Samsung and so on.